Best Investment Options After Demonetization

Written on Monday, December 5, 2016By Mitali Sharma

We all will remember the year 2016 for the big bang Demonetization. The act of demonetizing Rs 500 and Rs 1000 as legal tender of India has become the source of various economical changes that have put significant impact on our political and social systems as well.

Cashless Economy or digital Economy is one word that has become highly popular post demonetization. Many are advocating that demonetization marks the beginning of cashless economy in India. Incredible growth in the use of debit cards, credit cards, mobile banking, e Commerce sites, online fund-transfer services, etc. in the last month, clearly shows that individuals having access to the digital facility (especially the Urban crowd) are fast embracing the concept of 'Cashless Economy' by adopting cashless transactions in their day-to day requirements.

How To Do Wealth Creation in Cashless Economy?

Definitely, Demonetization impacted the Investment sector. In the current situation, investors are trying to figure out answers to the questions like how to do wealth creation in cashless economy? What should be the investment strategy? The blog highlights the right investment products.

Equity Mutual Funds:

Those looking for long term investment, for them Equity Mutual Fund is one of the most lucrative products to invest on after demonetization. Lower interest rates tend to be positive for equities. Aggressive investors should tide over the short term volatility by staggering investments in Equity Mutual Funds through the SIP / STP route. Through Systematic Investment Plan (SIP) one can invest in small amounts starting from Rs 500.

Moderate to conservative investors may look for Equity oriented Asset Allocation funds such as Balanced Funds, Equity Savings Funds, Monthly Income Plans & CPOFs in decreasing order of riskiness. Investors should also focus on Diversified Equity funds in the Large & Flexi cap space along with Value Style Funds.

Investing on Equity Mutual Funds offers two major benefits. First, it offers inflation-beating returns, if the investment is for a long term. Second, the exit load for these funds is only for 1 year. Also, when the investment period is more than 1 year then the capital gains get exempted from tax liabilities.

Bonds:

Recently, the Reserve Bank of India (RBI) cut the repo rate by 0.25 per cent and from 6.5 per cent, now the repo rate stands at 6.25 per cent. "Since January 2015, the RBI has cut the repo rate by 1.50"-http://economictimes.indiatimes.com/. Because of demonetization, these rates are expected to decrease further and this will further lower the deposit rates. Thus if you are looking for good returns, then bank fixed deposit won't be a very good option at this point of time. Interest rates are expected to fall further.

In such a situation, you can lock high interest rates in your pocket by investing on GOI (Government of India) taxable bonds. These bonds offer 8% assured returns and are 100% secured and guaranteed by Reserve Bank of India.

Minimum investment is Rs. 1000 and there is no ceiling for the maximum investment. The tenure for these bonds is 6 years and pre-mature withdrawal is not allowed. Upon investment, you will get your interest paid half-yearly or cumulatively. For non-cumulative bonds, the half-yearly interest are paid on 1st February and 1st August of each year. Nomination facility is available on these bonds but as it exists in the form of Bond Ledger Account, so these are non-transferable.

To know more about demonetization and its short term and long term impact on our Economy, check our guide on Demonetization: Wealth Creation in Cashless Economy. Download the Free Guide